John J. Petillo: Funding PILOT reimbursements helps ensure prosperity

By John J. Petillo

Published
2:04 pm EST, Wednesday, December 19, 2018

In his op-ed on the importance of supporting PILOT funding in Connecticut (Why PILOT Doesn’t Fly Right, Dec. 10), Bridgeport Mayor Joe Ganim correctly points out that cities play a vital role in anchoring and supporting neighboring communities, attracting new residents and employers to the region and offering a variety of important services, institutions, vibrant city centers and the arts. Many of these organizations and entities are tax-free, reflecting their overall value to city residents and surrounding towns.

Granting property tax exemptions to qualifying nonprofits, including higher education, has been around longer than the U.S. Constitution. This practice is based on British tax models that recognized the value these entities provide, and their role in enhancing education, health and the general welfare of each state. But this lost revenue leaves gaps in local budgets, and those gaps are causing pains as municipalities struggle with dwindling state resources, decreasing property tax revenues and increased expenses. At the same time, neighboring municipalities utilize and benefit from these not-for-profit organizations. It is an unjust skewing of the burden to municipalities that welcome hospital, colleges and justice facilities.

To its credit, Connecticut is ahead of the national curve when it comes to a valuable policy designed to help compensate municipalities for revenue lost to tax-exempt organizations such as colleges and universities, nonprofit hospitals and cultural organizations. This compensation was supposed to lessen tension between cities and their tax-exempt stakeholders and help them focus, instead, on the many symbiotic educational outreach, recreation, service and arts programs they share with their local communities.

Called Connecticut’s Payment in Lieu of Taxes program, or PILOT, it is one of a handful in the nation. Few states besides Connecticut offer payment to towns for the revenue that would have otherwise come in from tax-exempt institutions. PILOT statutory changes in 2015 created new tiered payment schedules commensurate to the share of PILOT-eligible property on a city’s grand list and how that share compares to the share of such property in other municipalities. Under current law, the grants must be proportionately reduced if the state’s annual appropriation is not enough to fully fund them.

And that is where Mayor Ganim’s ire is justifiably focused. As the state struggles with an onerous budget deficit and lower tax revenue, it has not met its PILOT obligations to local cities. Ganim points out that PILOT reimbursements have been plummeting over the last 10 years, and he is encouraging Gov.-elect Ned Lamont to work with the Legislature to more fully fund PILOT revenue to municipalities like Bridgeport and other cities facing financial upheaval and service challenges. Smaller, more affluent contiguous communities, he stresses, reap significant value from these services and amenities while the cities unfairly bear the brunt of the cost.

Connecticut’s PILOT program acknowledges that colleges, universities and hospitals benefit everyone residing in our state, culturally and economically. Now, as a new administration takes its seats in Hartford, it is essential that our leaders look at every possible opportunity to stem the migration of workers, students and employers out of Connecticut to other states where job growth, innovation, quality-of-life attractions and thriving cities are dwarfing our state’s efforts and tapping our traditional strengths.

While campaigning, Lamont spoke to the importance of bringing back or creating new jobs, attacking high taxes and addressing rising cost-of-living issues, all important issues for Connecticut residents and voters. He also recognized that our state’s private and public colleges and universities play a vital role in fueling Connecticut’s economy and future prosperity, and that we are essential educators, employers and active community partners. He has indicated support for funding the PILOT program.

Tax-exempt status for institutions of higher education and hospitals provides necessary and important support that helps us effectively pursue our basic mission of teaching, research and service. Members of “the flora and fauna” crowd who want nothing to interfere with their Elysian fields homesteads are inappropriate and selfish. We join Mayor Ganim in imploring the governor and General Assembly to ensure statutory funding of PILOT and remind legislators looking for quick fixes not to undermine tax-exempt protections that help preserve these vital pillars of Connecticut’s economic stability and future growth. These institutions are for the entire population, the credibility of Connecticut and its prosperity.